Budget cutters target ObamaCare subsidies as fiscal cliff approaches?

posted at 11:21 am on November 12, 2012 by Ed Morrissey

We are less than 50 days away from the fiscal cliff, and Congress returns to Washington today with a mission to avoid a fiscal and economic crisis that would easily spin the country into a new recession. Peter Ferrara blasts Obamanomics in general at Forbes today, but also explains the stakes involved for the lame-duck session:

Last year I wrote a short book for Encounter called “Obama and the Crash of 2013.” I predicted then that Obama’s policies of increased top tax rates for nearly all major federal taxes, soaring new regulatory burdens, and loose, cheap dollar monetary policies, would produce renewed recession in 2013. Since then I have been joined in this view by the Washington establishment as reflected most authoritatively by the Congressional Budget Office.

Already enacted into current law to go into effect on January 1 are increases in the top tax rates of nearly every major federal tax. That is because the tax increases of Obamacare go into effect on that date, and the Bush tax cuts expire, which the President refuses to renew for the nation’s job creators, investors and successsful small businesses.

As a result, the top two income tax rates will jump nearly 20%, the capital gains tax rate will soar by nearly 60%, the tax on dividends will nearly triple, the Medicare payroll tax rate will skyrocket by 62% for these disfavored taxpayers, and the death tax will rise from the grave with a 57% rate increase.

This is all on top of the U.S. corporate tax rate, which under President Obama is now the highest in the world, except for the socialist one party state of Cameroon, at nearly 40% on average, counting state corporate taxes. Even China has a 25% corporate rate. The average in the social welfare states of the European Union is even less than that. Canada, which has been booming since Obama became President here, now sports a 15% federal corporate rate.

Unfortunately, the massive deficit spending of Obama’s first term leaves little room to roll back these tax hikes, unless spending gets a significant haircut in some way. That was the original purpose of sequestration — to make the alternative so unpalatable to both sides that actual spending cuts would get implemented. That didn’t happen in the 14 months after the debt deal in August 2011, but now that the election is over, Congress may have to rush through some key budget reforms to keep the triggered cuts from occurring, and to push off tax hikes to prevent another ruinous recession.

One place that budget cutters might find cash, reports The Hill, is the very legislation that Obama’s supporters hoped that his re-election had secured — ObamaCare. While Obama demands tax hikes for those making over $250,000 a year, budget reformers are questioning his plan to provide subsidies for those making as much as 180% of median household income:

Supporters of President Obama’s healthcare law breathed a sigh of relief Tuesday, but they’re already back at work trying to protect one of its key provisions from budget cuts.

As the election fades into the rearview mirror and attention turns more seriously toward the looming “fiscal cliff,” lobbyists and advocates are once again wondering whether Congress might look to the healthcare law for spending cuts.

Specifically, lawmakers might be tempted to tap the health law’s insurance subsidies — by far its most expensive provision, and probably the most tangible benefit it will provide. …

Critics say the subsidies are too generous — 400 percent of the poverty level is more than $90,000 per year. And because the subsidies don’t begin to flow until 2014, they represent a giant pot of money that’s in the budget but wouldn’t have to come out of anyone’s pocket.

Median household income is roughly $50,000 per year, which makes that threshold more than 180% of that level. I mentioned this often when analyzing ObamaCare during the legislative debate, as this cutoff at 400% of poverty level could end up including over 63% of all American households if employers started dumping health insurance en masse. That would be entirely unsustainable, and in many cases entirely unnecessary.

However, such a cut would entirely cripple ObamaCare for that very reason. The mandate requires everyone to carry health insurance (as a tax, thanks to John Roberts and the Supreme Court), but the cost of the required comprehensive policies would be ruinous. The requirement could be modified to hospitalization coverage and HSAs, but that reform was specifically barred by ObamaCare, even though it makes the most sense for younger Americans. Cutting off subsidies to middle-class households would create widespread violations of the mandate, and probably would end up with more uninsured Americans than when we started this mess, thanks to the undermining of the employer-provided model without any real reform that would have made insurance personally cost-efficient.

The problem with all of this starts with ObamaCare itself. Any reform which requires federal subsidies to those making 180% of median household income to be affordable is an unsustainable model, and the proposed budget cuts simply reflect what would eventually have to happen in the future anyway.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Comments

You ought to be mad at the GOPe for cramming McVain and Mittness as our options, not because of their conservative principles, but because it was their turn.

LIB!!!! Sorry that it will hurt many of us here but that is the prescription for us all.

AH_C on November 12, 2012 at 1:47 PM

Read on, grasshopper. I said I am angry at the Republican party for Mitt and for having their collective heads so far up their own a$$es that they can’t run a decent candidate let alone a 21st century campaign. I voted for Newt, who probably isn’t your favorite either, but he was a damn sight better than Mitt. Nevertheless, when it came down to the day I voted for the non-commie and the one who might just have some sense when it came to the budget. Believe he would repeal Obamacare? Not for a minute, but other issues were equally important to me. Sorry, but I don’t regret what I did to staunch the bleeding. The Republican party should.

No, it doesn’t go far. We’re in this bracket. Between $70-75K. It DOESN’T go far. I feel like we are barely middle class these days. And we live in TX where the cost of living is cheaper than many areas of the country. I am very very concerned about how we are going to survive when the first of the year comes.

JennM111 on November 12, 2012 at 1:28 PM

I know and sympathize with your situation. Folks in that range with kids in the North East have it even harder home heating in the winter adds another big bill. In Texas you may run the AC in summer months.

When they cant afford to pay out the freebies their supporters will turn on them.
ldbgcoleman on November 12, 2012 at 12:31 PM

Nope.

Why do you think the rich are constantly demagogued as not paying their “fair share”, even though the top 5% only collect about 40% of the income but pay 60% of the taxes?

It’s all part of the plan: Push things to breaking, go bankrupt, “workers” and moochers rise up against who the Dems and the treasonous media have been blaming. You won’t hear those percentages above from a single major news outlet.

When the checks stop and the system crashes the entitled will swarm into the rich neighborhoods and high rises, even interpreting some middle class subdivisions as rich zones (they are much richer than most Harlem/East L.A. neighborhoods) and try to take it.

It won’t matter that 100% of the income of the rich would only sustain us one year. It won’t matter that the top half are already paying 100% of the taxes.

That’s why I live in the country, I’m armed, and am rapidly collecting supplies. My property looks like I’m one of them, but if they come on my property, they will be shot.

Food riots will be first, as either food stamps are unable to cover massive price inflation, or the transportation industry crawls to a halt under $8 gas, or both. The average grocery store has 4 days worth of food for it’s customer base. When those items triple, quadruple or worse, when they no longer become available due to transporation issues, mayhem will ensue.

And it won’t be the Dems fault, at least not in the minds of the entitled and dependent classes. It will be the fault of the evil rich.

Personally I hope they go after the neighborhoods of Diane Saywer, Matt Lauer, Katie Couric, Mika B, Chris Matthews, etc first. They help along the “rich don’t pay their fair share” meme unaware of the schism they are creating. We’re not Americans anymore thanks to the TMSM. We are poor, middle class, rich, etc. and the progressives are pitting us against each other, just as Alinsky, Piven and their ilk have planned.

I KNOW my employer, a Fortune 10 company, will dump us into the pool like so many hot potatoes. I make too much to get any kind of subsidy, but have a pre-existing condition which will make health insurance unaffordable for me.

Nice to be “rich”, ain’t it?

Guess I’m just screwed, eh? Thanks, Obama, for being such a proud anti-colonialist that you are willing to flush your own country down the drain. I’m sure your Commie mom and dad are so proud!

True – but the chances of having a filibuster proof congressional majority and WH is next to nothing.

When the crash comes – and it is -the party who brought you all of this will beheld responsible, and by then the MSM will be bankrupt so the marching orders will not be so well defined. Take from the gated liberal communities – they will get wiped out first.

Welcome to the post-apocalyptic world. I’m far away from the big cities. Most of my neighbors agree with me.

i have resisted haveing guns in my home for years. not because i dont like guns , because i love them but because my home is very tiny and i dont have room for a gun safe and i have small children. but i have already told my husband he WILL be buying us atleast 2 handguns and a shotgun in january. im hopeing it wont happen but i have a very nasty feeling that the sh*t is gonna hit the fan in the upcoming years and i wont have my family at the mercy of the mob. besides if nothing else we can hunt our own food

No, it doesn’t go far. We’re in this bracket. Between $70-75K. It DOESN’T go far. I feel like we are barely middle class these days. And we live in TX where the cost of living is cheaper than many areas of the country. I am very very concerned about how we are going to survive when the first of the year comes.

JennM111 on November 12, 2012 at 1:28 PM

I know and sympathize with your situation. Folks in that range with kids in the North East have it even harder home heating in the winter adds another big bill. In Texas you may run the AC in summer months.

katee bayer on November 12, 2012 at 1:42 PM

And car payments and registration, inspection, maintenance.

dogsoldier on November 12, 2012 at 2:01 PM

Ya, summer utility bills here are getting bad. And we’re pretty conservative with the AC. We don’t keep it below 78. Ever. Even when we have those triple digit days.

We’ve been trying to prepare for the upcoming poo storm that’s about to hit. My husband has added to his gun collection. We’ve tried to add ammo when we can. Added some extra food to the pantry here and there, as well as the freezer in the garage. But it’s hard to do those things when gas is going up, food is going up. There isn’t much left over to “prepare” for the worst. :(

I am wondering if I should divorce my wife and start ‘renting’ a room in our house. We have a large disparity in income and if she has custody, she might quality for full coverage for her and the kids. And probably food stamps and other free stuff from the government.

There may be money in consulting folks on restructuring their living situation to better exploit government largess.

I am wondering if I should divorce my wife and start ‘renting’ a room in our house. We have a large disparity in income and if she has custody, she might quality for full coverage for her and the kids. And probably food stamps and other free stuff from the government.

There may be money in consulting folks on restructuring their living situation to better exploit government largess.

OBQuiet on November 12, 2012 at 6:08 PM

Yep, there’s already a lot of that going on with zero effort to stop it. Your local welfare office measures success by number of recipients.

Your rants aren’t true. And even if they are, this is a good thing because we can easily scrap Obamacare and roll out the single payer health care system.

BTW- Why are conservatives always pro business and anti worker? Conservatives will do anything to ensure workers get screwed at the expense of business owners. The ironic thing is that most of these workers are conservatives themselves. Studies have showed the poorest and most uneducated Americans are conservatives.

Don’t know if this has already been stated, just got home and am catching up.

I know that the spineless one of the House has stated that even though the House controls the budget and spending bills, it cannot defund ObamaTax because they can’t make political statements in spending bills. Let me rephrase that, Boehner says Republicans can’t make political statements in spending bills, the democrats have never had a problem with doing so. OK, that said, there is nothing political about making the absolutely pragmatic decision to cut spending on implementing ObamaTax by 90% over the coming years due to the huge federal deficit and the need to trim the budget. This will have the [ahem] unfortunate [ahem] effect of delaying ObamaTax implementation, but in the present fiscal circumstances, it would be imprudent to proceed to fund this huge new entitlement program for which the CBO continues to raise the cost estimate and has abandoned any pretense that it saves money.

Unfortunately, the massive deficit spending of Obama’s first term leaves little room to roll back these tax hikes, unless spending gets a significant haircut in some way. That was the original purpose of sequestration — to make the alternative so unpalatable to both sides that actual spending cuts would get implemented. That didn’t happen in the 14 months after the debt deal in August 2011, but now that the election is over, Congress may have to rush through some key budget reforms to keep the triggered cuts from occurring, and to push off tax hikes to prevent another ruinous recession.

So sequestration was so painful that no one would ever allow it to happen, but it hasn’t happened in the last 14 months? And somehow we think it will happen now?

I’m not following this boundless optimism. Sure, I’d love to believe it will all work out in the end. But that’s not what I’m seeing.

It may be time to stop dismissing the people who call Obama a Marxist. If he really believes in Marxism, then he doesn’t want the economy to improve, or the military to recover, or the U.S. to be strong. Which means that the built-in assumption most people have that he wants to be a successful president is in fact misguided.

Oh, he wants to be successful all right. But he has a different view of success than the rest of us….

I KNOW my employer, a Fortune 10 company, will dump us into the pool like so many hot potatoes. I make too much to get any kind of subsidy, but have a pre-existing condition which will make health insurance unaffordable for me.

under obamacare pre-existing conditions don’t exist(i think) you pay the same as anyone else your age. that’s why there will be No cheap policies. the healthy will subsidize you (i don’t mean subsidy based on income) but pre existing condition

The details of Obamacare are a mess, they should stop writing it now, since they can’t implement what they have. They had to pass it so you could find out what was in it, but all of what is in it is not in it yet so you can’t figure out how it applies to you, and if you pay a tax or get a subsidy or Can keep your insurance that you have now.

The Obama administration must hire the stupidest people on earth, remember Cash for Clunkers cost $24K in spending to give the car dealers the $3-4K break on the price of the cars? That is Obama Care, they cant stop spending, creating their big bureaucracy but no one gets any health care from it, the price just goes up more and more.